Web3 Payments: The Innovative Path of Cross-Border Payments for Consumers

In recent years, consumers' cross-border payment habits are undergoing profound changes. People are starting to try various payment methods but are still looking for better options. As an executive from a payment company said: "The changes in payment methods in the past 5 years are greater than those in the past 50 years."

In today's rapidly evolving landscape of blockchain technology and digital currencies, the changes in payment methods are essentially a revolution in accounting methods—the blockchain, a public and transparent global ledger.

The way humans have kept accounts has changed only three times over thousands of years, each of which has profoundly shaped economic forms and social structures. Each breakthrough reflects the co-evolution of technology and civilization.

• The single-entry bookkeeping of the Sumerian period allowed humanity to break through the limitations of oral communication for the first time, facilitating early trade and the formation of states;
• Double-entry bookkeeping played a role in promoting the commercial revolution of the Renaissance, facilitating the emergence of banks and multinational companies, as well as the establishment of commercial credit;
• The distributed ledger driven by Bitcoin in 2009 facilitated the emergence of decentralized finance, changes in trust mechanisms, and the rise of digital currencies.

This far-reaching transformation will not happen overnight, but is continuously evolving, and has currently facilitated Web3 payments based on blockchain and digital currencies, which are increasingly permeating various aspects of real-world society.

This article will leverage the recently released consumer cross-border payment survey report and explore solutions provided by Web3 payments for the current main scenarios of consumer cross-border payments through market cases, and finally look forward to the future development direction of Web3 payments.

1. The Ever-Growing Cross-Border Payment Market

Driven by the surge in cross-border e-commerce, cross-border travel, and cross-border remittances, the cross-border payment market is experiencing explosive growth. Consumers are making cross-border payments more frequently than ever, and it is expected that by 2027, related payments will reach $250 trillion.

Consumers around the world are embracing cross-border payments. Today, spending on cross-border transactions is higher than ever before, but what is truly interesting is the frequency. 30% shop via cross-border e-commerce every week, 45% send and receive remittances every month, and 66% travel abroad each year.

Typically, people develop habits that make routine decisions easier and more efficient, but in the field of cross-border payments, this habit has not yet been formed. On average, they use 4 out of 7 different payment methods, and only 16% of consumers consistently use their default payment method.

Currently, it seems that there is no payment method that can fully meet consumers' needs for cross-border payments, even though nearly 80% of consumers are still using traditional banks for cross-border payments. However, one thing is very clear to consumers: they need a secure and trustworthy cross-border payment provider.

From June 2023 to June 2024, a total of 771 million people engaged in cross-border transactions. Research indicates that this growth was driven by three categories of transactions: e-commerce, tourism, and remittances.

1.1 Main Scenarios and Methods

A. Cross-border e-commerce

Eighty percent of consumers choose to shop through cross-border e-commerce, with 67% of them making cross-border purchases every month. It is predicted that by 2026, the global B2C e-commerce market size is expected to exceed 8.3 trillion dollars. Nowadays, finding desired products globally is no longer a challenge, but the payment experience still needs improvement. Consumers are eager for simple, easy-to-use, and reliable payment methods to successfully complete each cross-border shopping experience.

B. Cross-border Travel

Among every three people, two have cross-border travel experiences, and 52% of them travel more than once a year. According to the 2024 travel trends, the main purpose of travel for people is to relax and relieve stress. Therefore, what travelers least want to encounter is the pressure or worries of shopping. They need a simple and secure payment method so that they can fully enjoy their travels.

C. Cross-border remittance

Four out of every ten people use cross-border remittance services, with 45% of them making remittance transactions every month. Despite the complex geopolitical situation, the number of international migrants continues to grow, and it is expected that by 2028, the cross-border remittance market will exceed $1 trillion. This trend has also driven an increasing demand for remittances to domestic friends and family. Consumers are urgently seeking a safe and reliable cross-border remittance method.

Among the following seven cross-border payment methods, the average consumer will use four of them:

1. Electronic payment methods;
2. Credit or debit card;
3. P2P Transfer;
4. Bank Transfer
5. Online Transfer;
6. Prepaid Travel Cheques/Cards;
7. Cash.

1.2 Why is now the right time to provide cross-border services to consumers?

The cross-border trading market is vast and continuously growing. This is a critical stage in the development of cross-border trading. An increasing number of consumers are frequently making cross-border payments, but traditionally, these transactions tend to be slow, costly, and lacking in transparency. However, all of this can change completely.

Consumers are currently using various payment methods. Each consumer is trying different payment solutions, actively seeking the one that suits them best. However, they have not yet found the ideal solution. They desire more choices and hope to receive guidance to help them make informed decisions. As consumers begin to form habits that may last a lifetime, now is a critical moment to influence their choices.

Consumers need stable payment habits and reliable partners. As banks and fintech companies realize the potential of becoming consumers' preferred cross-border payment method, market competition will intensify. This is not only an opportunity to attract new customers through new services but also an opportunity to retain existing customers for cross-border consumption through one-stop solutions. However, there is also the risk of other competitors getting ahead.

The foundation of trust cannot be ignored. In cross-border transactions, trust, security, and reliability are crucial, especially when the transaction amounts are often large. Consumers are very sensitive to these factors and expect banks and fintech companies to provide a safe and reliable payment environment. Winning customer trust is key to establishing long-term partnerships.

2. Main Scenarios and Models of Consumer Cross-Border Payments

The following will delve into the scenario processes of cross-border e-commerce, cross-border travel, and cross-border remittance payment transactions, as well as the core issues encountered in cross-border payments.

2.1 Cross-border E-commerce

In the past year, approximately 589 million people worldwide participated in cross-border e-commerce transactions. Among them, 72% of transactions involved purchasing physical goods through mainstream online retailers, and 44% of transactions were for digital products. Although the social media market is on the rise, only 30% of consumers shop through these platforms, which may be related to concerns about data breaches.

In terms of cross-border shopping payment methods, consumers mostly choose credit cards, debit cards, or digital APP payment services. However, financial institutions may be surprised to find that only 51% of consumers use credit or debit cards. This means there is still market space for other payment methods, such as 36% of consumers choosing digital APP payment services, and some consumers using wire transfers or P2P services.

However, there are still significant differences in consumption habits across different countries:

Germany: Consumers are least willing to use credit or debit cards, with only 32%, while they prefer digital app payment services at 49% and bank transfers or wire transfers at 35%. This may be because consumers place more importance on the security and ease of use of payments.

Philippines: Consumers' preferred digital APP payment method ( 49% ), which may be related to the fact that 48.2% of local consumers cannot access traditional banking systems.

These data indicate that the choice of payment methods varies by region and consumer demand, and that financial institutions and e-commerce platforms need to provide diversified payment solutions based on local market characteristics.

The payment scenario for cross-border e-commerce is more likely to be consumers in their home countries making purchases through payment gateways on overseas e-commerce platforms. Payment gateways will inevitably connect various payment methods, such as preferred credit or debit cards ( through card organization networks ), digital APP payments ( through digital apps ), and bank transfers ( through bank networks ), etc.

( 2.2 Cross-border Travel

Among the consumers surveyed, two-thirds had traveled abroad in the past year, with 62% indicating they used credit or debit cards to book their trips, making it the most popular payment method. This preference is reflected not only in the booking of trips but also in their actual spending abroad. Most respondents used the same payment method during their travels as they did when booking their trips. This may be because credit cards are widely accepted and offer conveniences such as instant currency conversion and fraud protection.

Despite the ever-increasing prominence of factors such as geopolitical issues, cross-border travel has become a norm, especially in Singapore )86%( and the UAE )84%(, where consumers have the highest proportion of traveling abroad. In the 13 markets surveyed, nearly 50% of respondents in each country had traveled abroad in the past year.

In terms of travel payment methods, most consumers choose credit cards or debit cards to book travel or pay for travel expenses. However, there are also a few consumers who use other payment methods such as bank transfers, wire transfers, or digital app payment services.

Canadian travelers particularly prefer credit or debit cards, with the proportion of using other payment methods being less than 10% compared to other markets. This may be because Canadians value credit card reward systems more, with consumers placing greater emphasis on reward points rather than transaction speed.

In contrast, Brazilian tourists are the least likely to use credit cards, with a likelihood of less than 50%, which may be related to Brazil's historically high credit card interest rates, and is also influenced by the widespread adoption of local instant payment platforms.

Payment scenarios are more likely to be: consumers using their domestic debit or credit cards to make purchases at physical overseas merchants, or using digital app payment platforms to scan codes for payment.

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( 2.3 Cross-border remittance

In the past 12 months, 40% of respondents have sent or received remittances, with bank transfers or wire transfers being the most common payment methods. In countries with a large immigrant workforce, such as the UAE and the Philippines, the remittance send-receive ratio is the highest at 87% and 74%, respectively, which is not surprising. Remittances are an important source of funds for millions of workers and families worldwide, and remitters seek the most cost-effective payment services for each transaction.

In 2023, the total amount of remittances flowing to low- and middle-income countries grew by 3.8%, reaching 669 billion USD. In the Asia-Pacific region, China, India, and Singapore are markets with frequent remittance activities. A notable trend is that digital app payments are increasingly favored by remittance senders for their security and ease of use, gradually becoming the primary method for sending and receiving remittances. Compared to traditional remittance methods, digital app payments are considered to have higher security.

There are significant differences between cross-border remittance payment methods and digital app payment methods. Although the processing time for banks or wire transfers is longer and the costs are often higher, they remain the most commonly used remittance methods.